Public Service Enterprise Group (PSEG) earlier this month said that it plans to invest approximately $15 billion over the next five years upgrading its energy infrastructure. PSEG reaffirmed its 2017 earnings guidance of $2.80 to $3.00 per share.
Speaking at the company's Annual Investor Conference in New York, Ralph Izzo, PSEG chairman, president and CEO, told the financial community that the company's strategy and strength of its financial position successfully delivered double-digit growth in rate base and earnings in 2016 at PSE&G. In February, the company announced a 4.9 percent increase in the dividend, marking the 13th increase in PSEG's dividend in the last 14 years.
PSEG expects the utility to represent approximately two-thirds of its non-GAAP operating earnings in 2017 and its share is forecast to continue to grow. Over the next five years, the utility projects a baseline $12.3 billion infrastructure program which will deliver high-single digit rate base growth. Extensions and expansions of the baseline investment program should expand PSE&G's five year capital program to $13.8 billion and a 9 percent growth rate. PSE&G has further identified potential opportunities that could address public policy and customer needs for long-term reliability.
"Together, these investment programs could extend our existing forecast of a baseline of 7 percent and up to 9 percent compound annual growth in the utility's rate base well into the next decade," Izzo said. "By investing in energy efficiency while making improvements to our electric and gas infrastructure, we think utilities can help customers save on their monthly energy bills and still provide a stable rate of return for their investors."
Izzo explained that PSE&G has the potential to become a model utility of the future -- an energy company that meets societal demands for enhanced grid resiliency, investment in renewables and universal access to energy-efficient technology. These long-term opportunities to invest in the utility of the future are not reflected in current capital expenditure plans, but have the potential to bring significant gains to both customers and shareholders.
"Recent growth in the utility has offset the challenges to our business from low electricity prices this year," Izzo said. "As energy markets continue to evolve in response to the low-priced natural gas environment, PSEG Power is meeting the challenge by increasing the efficiency and performance of its plants while lowering costs."
Power's plants, with locational and fuel-cost advantages, generate free cash flow that can be used for re-investment. As Power's investments decline with the completion of three clean, highly efficient combined-cycle gas plants in the PJM and New England markets, more cash will be available to help fund expanded investment at PSE&G.
"We continue to work toward a future with universal access to more reliable, resilient, cleaner and affordable energy," Izzo said. "By delivering on our strategic investment program, we are building an energy company that provides strong growth for our shareholders and a sustainable energy future for our customers."